Freicoin - easy-to-use demurrage currency
freico.inQ: What is the Freicoin Foundation? A: The Freicoin Foundation is a non-profit organization, aiming to support sustainability and biodiversity by integrating Freicoin into economical relations.
Q: You said that Freicoin is decentralized. But the Foundation makes it centralized! A: You are right. But we have no other solution. Initial coins should be distributed to the society.
Q: Why can't you just give these coins to miners (as in Bitcoin). Why do we need a bureaucracy? A: The mining community consists mostly of enthusiasts, not ordinary people who use computers to browse the Internet.
Q: How many coins does the Foundation have? A: The Freicoin Foundation distributes 80% of the total Freicoin money supply through grants. The remaining 20% is a reward for miners, who support the network with their computing power.
Hahaha... no.
My gut tells me that somehow there is room for a "everyone gets N" style ~~virtual currency~~. Like you prove your identity and get the same amount that everyone else gets (scrubbed on transfer) because the whole early-adopters-win thing is sucky.
But this doesn't look like the answer.
So, like a virtual allowance?
Is the "whole early adopters win" thing only sucky because you are not an early adopter? Note that I'm not an early adopter either, but it seems a bit nonsense.
Also, BTC is still pretty young, you could still be a relatively early adopter. You could spend a few months researching, and a few tens of thousands of USD to purchase a competitive mining rig, and you could still make a fortune, or you could lose it all. It isn't the same "anybody can do it" world that it used to be, but it certainly is still low barrier to entry. Is this really a dislike of systems that reward personal risk taking?
This is basically what OpenCoin/Ripple is trying to do, but a lot of people don't trust them.
How would you prove your identity?
One does not simply invent a currency to solve a percevied problem in our economic system. A currency must also provide compelling economic reasons to actors for adoption. That is, what is in it for me to use freicoin?
I don't see any reason to give money, buy, or sell, or do anything with freicoin. To me, the fact that freicoin decays when not used is a bug, not feature.
Completely agree. FreiCoin: when programmers do not understand what Nash Equilibrium means. Nor the Tragedy of the Commons.
They made a great attempt, but sometimes one's best try is just not enough.
> FreiCoin: when programmers do not understand what Nash Equilibrium means. Nor the Tragedy of the Commons.
Care to explain?
Encouraging currency to be used/passed around more is not a bug for me.
Might interest you: http://www.lietaer.com/2010/03/the-worgl-experiment/
I can't speak for others, but in my case, if I came to possess some of this currency I would immediately seek a way to convert it into something that would not decay as I kept it.
I think that saving money for both unexpected problems and future investments is an important part of social responsibility, and I would not adopt a currency that was deliberately designed to make saving difficult unless it was forced on me. Even then, I'd probably try to turn it into some kind of commodity that I could sell again later in order to dodge the losses.
There are a few assertions on the main page that I find interesting, in particular the one about money value vs goods value being "the underlying cause of the boom/bust cycle." I don't have time to read the linked book about it, is there a quick version of the explanation?
Yes, the point is to get you to convert the currency into something that doesn't decay. That keeps the money supply flowing and encourages you to invest in productive assets, both of which are good for society. A deflationary currency encourages you to stuff all your coins under your mattress.
How does it improve the situation if I'm just buying something else to stuff under my mattress (e.g. silver)? I guess my issue is that it seems like even with a system like this implemented at a national scale, over the long run you'd end up with people rushing to convert the currency into "real" money, that being whatever commodity people land on as being most easily traded/stored/etc. At that point it seems like the commodity becomes the currency.
Because the assets you're holding under your mattress aren't affecting macroeconomic factors derived from the supply and demand of the currency of trade. More simply, you are conflating money as store-of-value and money as medium-of-exchange.
Encouraging currency to be used/passed around more is not a bug for me.
I never doubt your goal, just the ability of your currency to achieve what you are trying to get.
Might interest you: http://www.lietaer.com/2010/03/the-worgl-experiment/
I have no reason to doubt the story as told there(other than my theoretical complaint), but I am not a historian or economist.
but I am not a[n] .. economist
Economists have not proven themselves credible.
It makes it harder to accumulate wealth. This may or may not be a good thing depending on your point of view.
Taken to an extreme, it's move back to hunter-gather societies when you had to work every day - no stored capital.
> That is, what is in it for me to use freicoin?
Perhaps the advantages of bitcoin but without the instability.
If bitcoin continues to go through boom and bust cycles that change its value by orders of magnitude, then ironically an alternative with demurrage might prove to be a better store of value. You might lose some of your savings, but at least it'll be predictable.
that's not a very compelling argument given traditional-currency savings accounts will at least grant you very small interest rates.
Fiat currency savings accounts almost universally have negative rates of real return. (The small amount of nominal interest is cancelled out by a couple percent per year of inflation).
Sure, but you get the other advantages of bitcoin. I interpreted the question as coming from a bitcoin user: "why use bitcoin+demurrage if I can just use bitcoin?"
If you have already decided that a savings account with interest is an even better way to store value, then my argument indeed doesn't work.
Irony aneurysm!
Not globally, but to solve local economic problems people are making real headway. Local currencies that can only be spent with local businesses are solving a problem right?
Why would you say no to accepting freicoins, if you could immediately turn around and convert that into whatever currency you do want to hold?
Does anybody else feel that the current proliferation of P2P cryptocurrencies looks symptomatic of a pyramid scheme that has proven its viability (in the form of BTC) and is now being repeated by unscrupulous copycats who smell a quick buck?
I'm not calling the concept of BTC-style cryptocurrency a deliberate, malicious pyramid scheme in itself. I think this is an unintended side-effect.
Yes. Well, qualified yes: I don't believe that the new cryptocurrencies are more of a pump-and-dump than Bitcoin is. The pump-and-dump model is intrinsic to why Bitcoin is popular: creating lots of widely distributed coins early, then making them increasingly dear, creates a built-in base of... let me be charitable and call them "cryptocurrency evangelists", who have high incentive to go to their local online watering holes and claim that Bitcoin is the next big thing.
The equilibrium is predictable:
http://news.ycombinator.com/item?id=2608891
[Y]ou can create an arbitrarily high number of bitcoin-like electronic currency units. [These new varieties will have] guaranteed scarcity, anonymity, and a new goldrush phase -- so if you got dumped rather than pumped, you have a new opportunity to start at the top of the pyramid scheme this time.
The equilibrium is that sooner or later expected returns on starting a new distributed pump-and-dump dwarf expected returns of getting in late on bitcoins. And then poof.
Bitcoin is a wonderful engineering achievement: a spontaneously organized, decentralized, peer-to-peer boiler room from which arises a mediocre transaction processing network.
I like some of the concepts behind this freicon, it disincentives pump and dump and pyramid schemes. I personally will never put money in bit coins because it is like a pyramid scheme. Again what we really need is probably frictionless digital payments, not another currency.
You should never put money in freicoins either. Rather you should use it for buying and selling things, and just keep enough at hand for cash-flow purposes. What we want is a frictionless medium for digital payments, with good economic properties. Bitcoin doesn't offer that.
* Disclaimer: I'm one of the creators of Freicoin.
I appreciated the thoughts behind it, the relation between interest rates and incentives for investment is not something I thought about. It makes a lot more sense to me than bitcoins.
What is the best transaction processing network out there?
I wouldn't call it a side-effect but rather history recurrence. When fiat money became popular in 19th century almost each country started to issue its own currency. Issuing money gives real power. While the analogy is not complete because you can't dilute BTC-style currencies, the advantage here is in being bright and early adopter.
I think that demurrage proposed by Freicoin adds no value because hoarding isn't a real problem for Bitcoin or for any other currency. I suppose that the fear of hoarding comes from the fact that we still live in the world full of harmful keynesian ideas.
I'm still not getting why people call it a pyramid scheme. I don't make money by getting other people involved.
Sure, by getting others involved I increase the likelihood of it succeeding, but...that's everything.
If there's a fixed supply increasing demand by getting more people involved raises the price, which makes current BTC holders money.
That's true for anything though. If I convince you to get into model trains it's not because it will significantly raise the after-market value of my current (rolling) stock.
Except that model train manufacturers can raise production to maintain a price equilibrium (and have an incentive to do so, namely the profit they make from producing trains). Nobody can manufacture any more bitcoins than the algorithm allows.
Now if you convince me to get into collectible model trains, say pre-war Lionel models, the supply of which is fixed, that will raise the after-market value of your pre-war Lionel models. Whether or not that increase is significant depends on a lot of things of course.
So, you're saying all collectible markets are also ponzi schemes?
Collectible markets are not liquid and very whimsical. They are a place for rich people to show off their money, because when you have enough money, the money isn't important, it is buying something new and unique.
I didn't say anything was a Ponzi scheme. For starters, a Ponzi scheme involves fraud ...
Ugh, me no no wurds.
Ponzi scheme was not what I wanted to say. Pyramid scheme is what I wanted to say.
so you're saying that gold is a ponzi scheme ?
Gold is a lot of silly things but it's not a Ponzi scheme.
I would not call it a ponzi scheme because the idea of cryptocurrency does not entail any return, it is more like a seigniorage.
Some of these cryptocurrencies appeared in 2011, if I'm not wrong, in the middle of the first bitcoin price hike but they proposed different algorithms to generate coins, so I do not know if we can attribute their design to malice.
My main problem with it all is that users from these currencies built an identity around them, which mixes politics, ideology and hoarding of this currencies.
Funny, just this morning I decided to write a blog post about Gesell and the 'Schwundgeld' and his short usage in the city of Wörgl almost a century ago. The real question, of course, is wether inflation isn't a much more natural way of depriving currency of it's value.
What benefit does inflation have over demurrage?
Who does the demurrage fee go to? I couldn't find any information about this on their site. If it is just recirculated through re-mining or something, great (though I don't know how that would work). If it goes to the creators of freicoin then it is a blatant scam. I don't suppose it does, but it's suspicious that they don't mention where the money goes.
>The destroyed money simply vanishes, being permanently taken out of circulation. However to keep prices stable an equal-valued batch of freshly minted coins is created and distributed to the diligent accountants (the “miners”) who maintain at their own cost the global ledger of electronic transactions.
So in effect, the demurrage fee goes to the miners.
I don't think it goes anywhere. In theory Freigeld should simply decay into nothing (i.e. tax is collected by government who would depending on financial situation either print more or destroy existing). However I'm unsure where would in Freicoin decay go.
Also what makes me really suspect of it is the fact that Freicoin foundation centralizes the whole thing, so it's a bit pointless. I mean, why have an centralized P2P network? Another worrying thing is that under Silvio Gessel's original idea Freigeld is a local currency NOT a global one.
It's not centralized (according to their site). The value of held money just decays. The money doesn't go anywhere; it just disappears.
From FAQ, they say its centralized.> Q: You said that Freicoin is decentralized. But the Foundation makes it centralized! > A: You are right. But we have no other solution. Initial coins should be distributed to the society.No. There is a one-time issuance of currency to get the money out there. Of that, 20% goes to the miners over the next 3 years, and 80% is distributed through community-vetted grant and prize proposals.
Of the demurrage however, it is perpetually destroyed and recycled through the miners.
Yap, you should fork it and make your own :)
I would if it would serve any practical purpose. Freigeld needs to be adjusted (by printing/removing money) to maintain 0% inflation. To me that implies some form of centralization.
Some of the comments in the FAQ don't make any sense.
Q: Why does Freicoin use demurrage? I'm worried that my coins will just fade away.
A: Worried? It's a good thing. If the amount of money was stable, people would prefer saving it as opposed to spending it. This would decrease the quantity of money circulated, which in turn would act against the main purpose of money - a medium of exchange. With demurrage in place, you should think about money as it's meant to be, not as a storage medium of wealth.
There are also some really odd grammatical errors:
Q: With a zero interest rate, investments will be impossible!
A: It's already possible, for example, in Islam banking...
He means Islamic bank, which is basically a bank without riba. If you are interested you should look at wikipedia articles [1] and [2].
Funny thing is in Iran, which considers itself an Islamic country and says it follows Islamic laws in banking, interest rates are as high as 20%.
[1] http://en.wikipedia.org/wiki/Islamic_bank [2] http://en.wikipedia.org/wiki/Riba
I knew what he meant about Islamic banking, was more commenting on the grammar.
Interest rates can be high (or exist at all) in Iran because legally it's not actually interest. I understand it to be some sort of equity arrangement legally where the interest is actually dividends. But for macro purposes, it's interest rates.
Fun fact: Charging interest used to be against Christian principles aswell. Instead people would borrow from Jews (who did charge interest). The Magna Carta (in England) has sections on what exactly happens if someone ones money to Jews and dies (for example).
That's why usury was traditionally a Jewish profession in the Middle Ages--they were the only ones allowed to do it (and sometimes it was the only thing they were allowed to do).
What tickles me is that the people who criticise Wall Street for the value-less financial engineering of real estate, equities, commodities, etc., i.e. productive assets, turn around and start trying to create value out of thin air in fiat/social financial engineering schemes. I'm not commenting on the value of either activity directly as much as the asymmetry in holding both views simultaneously.
I think if you drilled a lot of people you'd end up with them being OK with all the financial engineering stuff, but _not_ OK with Wall Street risking _other_ people's money, not their own.
In other words, saving money is completely disincentivized in favor of constant spending? Why would anyone adopt this?
People are complaining about bitcoin's deflation meaning people are too incentivised to save rather than spend/invest
The fee is really no different from inflation in fiat currencies. Why would anyone save dollars when they are worth 1-2% less every year?
True, but in normal economic times, one can usually earn interest that outpaces inflation. Right now we have the federal reserve purposely punishing savers, just as freicoin would do.
I think the issue with bitcoin is that it's very very new. My guess is that it will eventually stabilize. On top of that, I hold the Rothbardian view that competing currencies are a good thing. Freicoin would only work if it had a monopoly on currency adoption.
Not the solution yet, but closer than anything we have
Doesn't seem to have a technical paper, or any real details on how it implements its goals. Anyone know if it's out there somewhere?
Edit: I found this: https://bitcointalk.org/index.php?topic=35705
Looks like demurrage is implemented simply by a rule for block validation: transaction outputs have to subtract from inputs based on the age of the coins. Don't know how they calculate age unambiguously.
There seems to be a lot of centralization in this particular implementation...eg., 80% of new coins go to the foundation for the first three years, which says it will distribute based on ideological motivations.
These are similar to concepts North Korea still cannot prove... I'm concerned that in the FAQ the creators think that private banks control money supply. While inflation and deflation are often painful, they're also the reason why cyclic growth is possible. Once upon a time, cycles enabled an American middle class. I'm optimistic we can revive that with historically effective method.
We all agree central banks stink in a recession, they are somewhat limited in what they can do, but during growth they double the fun.
I see the creator is intending income equality, and I think that's definitely just and purposeful. More research required.
How is this technically implemented -- is the demurrage subtracted once a year, or when you send a transaction?
Where do the coins taken for this fee go?
How can I apply for a grant from the foundation?
Good try at separating transactions from holding currency. The 'killer app' is not a government-less currency. The killer app is frictionless digital transactions. A previous article expanded on it.
I'd like to hijack the daily Bitcoin thread for a tangential discussion. My dad used to have a stamp collection. Back in the day most people would give you a funny look if you told them you collect stamps, but it was pretty cool to browse the collection and see all those stamps from all over the world. And the really rare stamps could cost quite a lot of money. So here's the question: is Bitcoin more valuable than stamps?
Value is subjective. Water is very valuable in the desert, but not so valuable in the middle of the Pacific. Diamonds are valuable in downtown Chicago, not so much to someone surviving in a lifeboat. During the hyperinflation of Germany in the 20's, people were trading furs and antiques for food. It's all subjective.
Saying that value is subjective is tautological, it's like saying pretty girls are pretty. What's the base case of the recursion? With stock certificates, you have expectations of future dividends. With stamps, they're nice to look at. What do you have with Bitcoin?
Nice to look at, for some people. Many couldn't care less. Of course, it's subjective. Bitcoins have value for some because those people value bitcoins over other things, like US dollars. It's a subjective value judgment why anyone trades one thing (dollars) for anything else (stamps, bitcoins, diamonds).
Stamps are only nice to look at for some people. The only reason I would buy a stamp would be to sell on again at an expected profit later on.
The value today comes from the expectation of future value, based on something as subjective as the opinions of a subset of society.
You can avoid taxes, tracking, and buy drugs with it.
So why would a reasonable actor choose to store money in this currency when there are easier to get, easier to use, demurrage free currencies available? I get the economic idea (I think) but it seems like something that would need a near monopoly to succeed. Otherwise it will just be a money pit for idealistic enthusiasts.
>>>Every Freicoin client is capable of performing these tasks, but in practice mining is the domain of computer enthusiasts and IT professionals with tuned top-level hardware
Given that my PC is obsolete crap, should I even bother getting the client?
The IndieGoGo campaign - http://www.indiegogo.com/projects/freicoin-global-community-...
complete and utter scam
Why do you think it is a complete and utter scam rather than just something that won't work?
One most of money generated goes to the central reserve to use as they see fit.
Two; Freigeld was advised as local and not global currency. The more its spread over the world the easier it is to manipulate.
If anyone is interested in a alternative bitcoin clone that actually tries new things have a look into ppcoin.
Being conditioned like this, wouldn't that deter early adopters? I mean, what would incentivize them?
The incentive is to mine and spend, instead of buy and hold.
stupidity